Financial Viability – Costing Teaching Modules at a South African University

Financial Viability – Costing Teaching Modules at a South African University

FINANCIAL VIABILITY – COSTING TEACHING MODULES AT A SOUTH AFRICAN UNIVERSITY by Carla Serfontein B Com (Hons) UP, CTA, CA (SA) submitted in fulfilment of the requirements for the degree MAGISTER ACCOUNTING in MANAGEMENT AND COST ACCOUNTING in the SCHOOL OF ACCOUNTANCY at the UNIVERSITY OF FREE STATE January 2019 Supervisor: Dr C Crous Co-Supervisor: Prof AvA Smit Declaration I declare that the dissertation hereby handed in for the qualification Magister in Accounting at the University of the Free State is my own independent work and that I have not previously submitted the same work for a qualification at/in another university/faculty. Carla Serfontein DATE I hereby cede copyright of this product in favour of the University of the Free State. Carla Serfontein DATE i Acknowledgements The birth of my little girl in 2017 brought a new understanding of the word “grace” into my life. This Master’s degree is just another result of grace upon grace in my life and I cannot start any process of gratitude without thanking my Heavenly Father for the grace bestowed upon me in every step of this process. To my husband, Willem, little girl Ana, and the newest addition to our family on the way, thank you for all your patience with very late nights, emotions raging from tiredness and dealing with competing with my laptop. You are my reason to get up every morning and you provide the biggest purpose to my life. You were a major drive in finishing this task. I love you so very much and I cannot imagine doing life without you. To my study leaders, Van Aardt and Cornelie, I truly and honestly would have been lost without you. I know that each of you played a very specific and special role in finalising this document. I also realised through the course of this process that the supervision and support you provided goes beyond expectations and that having both of you as part of this process was complete grace. Van Aardt, thank you that you not only developed me as an academic, but that your interest stretched much further into teaching me to be comfortable in my own skin. You will never know the impact of that process on every aspect of my life. Thank you that you trusted me in joining you on this journey that you have been walking for the past few years, you were most definitely the catalyst for a remarkable process. Cornelie, I admire your research knowledge and precision, but more than that, you have the ability to make a mountain seem like a small hill. You made me excited to grow and excel and you calmed me without ever knowing how great this challenge was for me. You are truly an inspiration and over the past five years you were an example that I will keep on striving to follow. I have the utmost respect for both of you and cherish the privilege of working with you. Prof Corli Witthuhn, thank you for taking me along on a truly remarkable journey and trusting me with the data in this study. Your support from day one made this study possible and I am forever grateful for the opportunity. My support structure were, firstly, strengthened by my dad, Callie. Thank you for all your advice, your phone calls and your excitement for me and my development amidst your ii own challenges and new ventures. Thank you that regardless of what you have achieved, this was significant in your eyes. You made me feel valued and determined to finish what I have started. Thank you to my mom Janine for checking in and being as excited for every milestone taking me closer to the finish line. To my father-in-law Boelie and mom-in-law Des, you effortlessly took care of my little girl in times where the going got tough. Thank you for prioritising Ana in your lives and giving me the opportunity to work late nights and still get around to clearing my mind with a run. Thank you for conversations in the afternoons when the day got too long and for ensuring that three mouths were fed when chaos reigned. I love each and every one of you dearly and am grateful for the support I have been blessed with. Thank you, Corrie Geldenhuys, for stepping in immediately to assist with the editing of my study. You were an answer to prayer and I appreciate your professionalism and thoroughness. Finally, thank you to my colleagues at the School of Accountancy. You are a bright spark in every day. Thank you for listening to complaints as well as excited ramblings with patience. Thank you for being every bit as excited as me with every step taken on this road. Your kindness and support makes this career path truly joyful. iii Language editing certificate CORRIE GELDENHUYS 083 2877088 POSBUS 28537 +27 51 4367975 DANHOF 9310 [email protected] 30 October 2019 TO WHOM IT MAY CONCERN Herewith I, Cornelia Geldenhuys (ID 521114 0083 088) declare that I am a qualified, accredited language practitioner and that I have edited the master’s dissertation for the following student: FINANCIAL VIABILITY COSTING – TEACHING MODULES AT A SOUTH AFRICAN UNIVERSITY by Carla Serfontein All changes were indicated by track changes and comments for the student to verify, clarify aspects that are unclear and finalise. The undersigned takes no responsibility for corrections/amendments not carried out in the final copy submitted for examination purposes. ............................................................ C GELDENHUYS MA (LIN – cum laude), MA (Mus), HED, Postgraduate Dipl, Library Science, UTLM ACCREDITED MEMBER OF SATI – Membership number: 1001474 (APTrans) GEAKKREDITEERDE LID VAN SAVI – Lidmaatskapnommer: 1001474 (APVert) Member of/Lid van PEG (The Professional Editors Guild iv Abstract Universities are facing a rapidly changing environment. The Fourth Industrial Revolution (4IR) is not only changing the skills needed to ensure employability, but also the mode of delivery, which threatens the very survival of traditional universities. Online education is becoming increasingly popular with the real potential of undermining the business model of traditional universities focusing on on-campus and face-to-face delivery of tuition. Universities in developing countries often face additional problems. On the local front, universities are confronted with several challenges such as declining subsidies from government and large numbers of previously disadvantaged youth who are poor, with substandard secondary education, but in desperate need of affordable tertiary education that will ensure employability. In contrast, over the last ten years, South African universities have responded with tuition fees increasing well above the inflation rate of the country to combat their relatively declining subsidies from government. Universities in South Africa have seen the climax of the impact of these challenges during the #FeesMustFall protests that shook universities countrywide. These student protests in South Africa reached a peak after the 2015 announcement by Blade Nzimande, the then South African Minister of Higher Education, of a proposed hike in tuition fees of between 10% and 12%. The counter-reaction of the protesting students was a call for free higher education. These protests reiterated the financing challenges universities are facing. The current trajectory of tuition fee increases implies that university education is becoming progressively more unaffordable for the majority of South African students. Add the increasing pressure on an already financially constraint government to finance poor students’ tertiary education (NSFAS), and you are confronted with a very concerning dilemma to ensure the sustainability of South African universities. Traditional universities will have to make urgent and serious decisions regarding their existing business model for them to remain financially sustainable and relevant in the future. The affordability crisis previously explained necessitates university administrators to make certain decisions. The main focus of management accounting is to provide relevant and accurate financial information for better decision-making. Informed decisions about future activities of any organisation, especially in the modern business environment, cannot be made without the required data and accurate information. The provision of cost information v to assist in the decision-making function of an organisation is an important requirement of management accounting in the digital age. Modules (a module is typically one of the courses that is presented to complete a degree) are the teaching building blocks of degrees and student enrolments, as well as the cost drivers of departments and faculties. The primary objective of this study is to determine the financial viability of teaching modules presented at a South African university using management accounting and cost allocation techniques that could assist the administrators of the university in offering affordable tertiary education to students. The study comprised both a literature review and empirical research. The purpose of the literature review was a) to describe the changing environment of and the challenges faced by universities; b) to explore the application of management and cost accounting principles for decision making in service organisations with specific reference to universities; and c) to explain why different cost information is required to achieve different outcomes. The main aim of the empirical research was to determine the financial viability of teaching modules presented at a South African university using management accounting and cost allocation techniques. The results of this study were utilised to discuss the different ways in which the calculation of the cost per teaching module could benefit a university, such as using the breakeven analysis as a benchmark to indicate viability. The empirical study was conducted following a quantitative design with an exploratory case purpose (one traditional South African university), using a sample of 3 497 modules presented to 276 627 students (enrolments). The direct cost of the teaching modules of the related university was determined using the methodology as set out in chapter 4.

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